Agenda item 7

Report of Audit and Assurance Manager

To

AUDIT COMMITTEE

On

16 June, 2017

AUDIT AND ASSURANCE MANAGER – ANNUAL REPORT FOR 2016/2017

1  SUMMARY

1.1 In accordance with the Public Sector Internal Audit Standards (PSIAS) and The Chartered Institute of Public Finance and Accountancy (CIPFA)’s Local Government Application Note, this report details the work undertaken by Internal Audit during 2016/2017, the main findings of the reviews upon which the Audit and Assurance Manager has based his opinion on the overall adequacy and effectiveness of the organisation’s internal control environment and the results of the Quality Assurance and Improvement Programme (QAIP).

1.2 The Audit and Assurance Manager’s opinion on the internal control environment is unqualified.

1.3 The Local Performance Indicators adopted by Internal Audit for 2016/2017 with their out turns are also included in the report along with the indicators and targets for 2017/2018.

2  RECOMMENDATIONS

i) That the Audit Actual / Planned days out turn for 2016/2017 be noted.

ii) That the Internal Audit Performance Indicator out turns for 2016/2017 be noted.

iii) That the Internal Audit Performance Indicators and targets for 2017/2018 be noted

iv) That the outcomes from the QAIP for 2016/2017 be accepted

v) That the Audit and Assurance Manager’s unqualified opinion on the Council’s internal control environment be accepted.

3  BACKGROUND

3.1 A key piece of evidence as to the effectiveness of internal audit is the extent of its compliance with the PSIAS and CIPFA’s Local Government Application Note, which amongst a number of prescribed standards requires the Audit and Assurance Manager to submit a formal annual report to the organisation, including the following:-

i) An opinion on the overall adequacy and effectiveness of the organisation’s internal control environment

ii) Disclosing any qualifications to that opinion, together with the reasons for the qualification

iii) Presenting a summary of the audit work undertaken to formulate the opinion, including reliance placed on work by other assurance bodies

iv) Drawing attention to any issues the Audit and Assurance Manager considers are particularly relevant to the preparation of the governance statement

v) Comparing the work actually undertaken with the work that was planned and summarising the performance of the Internal Audit function against its performance measures

vi) Disclosure of any impairments or restrictions in scope

vii) The results of the QAIP and progress against any improvement plans resulting from it

viii) A statement on conformance with the PSIAS and Internal Audit Charter

Work Undertaken by Internal Audit

3.2 The work actually undertaken by Internal Audit during 2016/2017 is detailed in Table 1 below. This compares actual days required against the Audit Plan. The reasons for any significant variations are explained in accompanying “Notes”.

3.3 In respect of completion of the Audit Plan, all reviews, except for the one of “Long Term Support”, which has been deferred until 2017/2018 at the request of management, have been commenced by the 31 March 2017. The reviews of “Budgetary Control” and “Procurement” were finalised by 31 May 2017.

3.4 Due to the deferral of the review of “Long Term Support”, the following reviews have been brought forward from the 2017/2018 Audit Plan:

Ø  Palace Theatre

Ø  Housing Financial Assistance

Ø  Housing Voids

Table 1 – Internal Audit Plan Position Statement / nt
Priority / Planned Days
2016/2017 / Actual Days
2016/2017
LEAVE / 182.00 / 182.50
AUDIT MANAGEMENT / 193.00 / 193.00
CORPORATE ASSURANCE WORK
CORPORATE RISK & OPPORTUNITY MGT / 27.00 / 23.25
INFORMATION ASSURANCE / 40.00 / 18.50
AUDIT CTTEE SUPPORT & MEMBER TRAINING / 60.00 / 62.75
GOVERNANCE & ASSURANCE REVIEWS / 40.00 / 34.75
COUNTER FRAUD TESTING / 20.00 / 16.25
CONTRACTS / MAJOR PROJECTS / 20.00 / 20.00
YEAR END CHECKS / 2.00 / 2.50
HOUSING BENEFIT SUBSIDY CLAIM / 45.00 / 43.75
254.00 / 221.75
DIRECTOR OF ECONOMIC GROWTH
PROPERTY SERVICES / H / 12.00 / 12.00
CAR PARKS / H / 12.00 / 12.00
MARKETS / H / 10.00 / 10.00
PUBLIC CONVENIENCES / M / 5.00 / 5.25
39.00 / 39.25
DIRECTOR OF PLACE & WELL BEING
PARKS & PITCH BOOKINGS / M / 5.00 / 5.00
CLIENT MONITORING – LEISURE CONTRACT / M / 5.00 / 5.00
LAND CHARGES / M / 5.00 / 5.00
CREMATORIUM & CEMETERIES / H / 11.00 / 11.00
26.00 / 26.00
DIRECTOR OF COMMUNITIES
RIGHT TO BUY / M / 4.00 / 4.00
TEMPORARY ACCOMMODATION / M / 8.00 / 8.00
LONG TERM SUPPORT SERVICE / H / 15.00 / -
RENT ACCOUNTING / H / 4.00 / 4.00
HOUSING STORES / H / 8.00 / 8.00
HOUSING REPAIRS / H / 15.00 / 15.00
54.00 / 39.00
DIRECTOR OF GOVERNANCE
PAYROLL / H / 25.00 / 24.75
25.00 / 24.75
DIRECTOR OF COMMERCE & CUSTOMER
GRANTS & CONCESSIONS / M / 4.00 / 4.00
BUSINESS RATES / H / 8.00 / 8.00
COUNCIL TAX / H / 11.00 / 11.00
BENEFITS / H / 15.00 / 15.00
CREDITORS / H / 15.00 / 15.00
BUDGETARY CONTROL / H / 7.00 / 8.25
DEBTORS / H / 7.00 / 7.00
ICT / H / 20.00 / 20.00
PROCUREMENT CARDS / M / 10.00 / 10.00
97.00 / 98.25
SPECIAL INVESTIGATIONS / 30.00 / 25.50
CORPORATE SUPPORT & DEVELOP
COMPLETION OF 2015/2016 REVIEWS
REGENERATION SERVICES
LONG TERM SUPPORT
RECRUITMENT
REVIEWS B/F FROM 2017/2018
PALACE THEATRE
HOUSING FINANCIAL ASSISTANCE
HOUSING VOIDS
SUPPORT & DEVELOPMENT
CALL LOGGER REPORTS
PROCUREMENT ADVICE
WELBECK RETURN
ADVICE TO REGENERATION SERVICES
ACCOMMODATION REVIEW
MARKETS EXPENDITURE
MEL DEVELOPMENT
RACECOURSE ACCOUNTS
TOWN CENTRE SYSTEMS
ADVICE TO HOUSING FINANCIAL ASSISTANCE
IIP ASSESSMENT
HB PAYMENT SCHEDULES
CORPORATE INDUCTION - FINANCE
PARISH COUNCIL ACCTS ADVICE
TASK & FINISH GRP – PROCUREMENT
COVALENT UPDATES
JOB EVALUATION PANEL
TITCHFIELD PARK PAVILION
CIVIC CENTRE PAYMENTS
THEATRE SYSTEMS ADVICE
NATIONAL FRAUD INITIATIVE
LEAVERS PROCESS REVIEW
ADVICE TO TIDESWELL COURT
INTERNET & INTRANET UPDATES
COMMUNITY ENGAGEMENT QUESTIONNAIRE
EXTERNAL AUDIT – HB CLAIM
DONCASTER LAKESIDE CERTIFICATE
PAYROLL “MYVIEW”
IR35 IMPLICATIONS / 82.00
(Note 2)
3.25
4.25
1.75
(Note 3)
8.50
1.00
9.00
5.75
3.00
1.50
0.25
3.00
1.75
0.25
0.50
1.00
0.75
0.50
0.25
1.00
0.50
2.25
0.50
1.25
1.00
0.50
1.75
66.25
8.50
0.25
1.75
0.25
3.50
3.00
0.50
2.25 / 141.25(Note 1)
CORPORATE REVIEWS
CLIENT MONITORING – SHARED SERVICES / H / 15.00 / 12.00
PROCUREMENT / H / 25.00 / 18.75
SICKNESS MGT / M / 12.00 / 12.00
RECOVERY OF DEBT / H / 35.00 / 35.00
87.00 / 77.75
TOTAL / 1069 / 1069

Note 1

The significant variance is due to the 66 days required to investigate NFI data matches, which is higher than expected due to the high number of matches identified from the exercise and also the extended range of matches, particularly in respect of Housing Waiting Lists. The Audit and Assurance Manager is to prepare a briefing paper for the Director of Governance on options for resourcing the current and future NFI exercises.

Note 2

The total days spent on the 2015/2016 reviews completed in 2016/2017 against the budgeted days are as follows:

Review / Budget Days / Actual Days / Reason for Additional Days
Regeneration Services / 10 / 15 / Additional testing required due to issues identified
Long Term Support / 10 / 14.25 / Original allocation under-estimated
Recruitment / 8 / 17.25 / Original allocation under-estimated

Note 3

The days spent, as at 31 March 2017, on the 2017/2018 reviews commenced in 2016/2017 against the budgeted days are as follows:

Review / Budget Days / Actual Days
Palace Theatre / 12 / 8.5
Housing Financial Assistance / 10 / 1
Housing Voids / 9 / 9

Performance of Internal Audit Service

3.4 In order to evaluate the performance of the Internal Audit Service, a number of Local Performance Indicators (PIs) have been utilised for 2016/2017, with the monthly and annual out turns being stated in Table 2. There are no significant issues to report

3.5 Internal Audit’s PIs for 2017/2018, with their targets, are detailed in Table 3.

Table 2 - Internal Audit Performance Indicator Out turns for 2016/2017

Outturn 15/16 / Target / APR / MAY / JUNE / JULY / AUG / SEPT / OCT / NOV / DEC / JAN / FEB / MAR / Outturn 16/17
% completion of approved Audit Plan with agreed revisions / 100% / 100% / 12% / 23% / 32% / 43% / 57% / 61% / 68% / 71% / 75% / 86% / 93% / 100% / 100%
% of unproductive time / 2% / <4% / 7% / 8% / 3% / 3% / 3% / 3% / 4% / 2% / 5% / 2% / 2% / 1% / 4%
% of Terms of Reference for planned audit reviews approved within 10 working days of issue / 83% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 96% / 92% / 93% / 93% / 90% / 90%
% of draft audit reports finalised within 10 working days of closure / 98% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100%
Outturn 15/16 / Target / APR / MAY / JUNE / JULY / AUG / SEPT / OCT / NOV / DEC / JAN / FEB / MAR / Outturn 16/17
% of individual audit reviews completed within target days or prior approved extension by Audit & Assurance Manager / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100% / 100%
% of returned client satisfaction surveys with overall assessment of excellent / 93% / >85% / 100% / 100% / 100% / 100% / 100% / 89% / 91% / 91% / 92% / 92% / 92% / 92% / 92%
% of audit time spent on providing additional value to the Council / 22% / 10 -15% / 10% / 10% / 14% / 12% / 12% / 16% / 34% / 23% / 8% / 26% / 46% / 52% / 22%
Outturn 15/16 / Target / APR / MAY / JUNE / JULY / AUG / SEPT / OCT / NOV / DEC / JAN / FEB / MAR / Outturn 16/17
No of working days lost per Internal Audit employee due to sickness / hospital appointments / 2.2 / < 2 / 0 / 0 / 0.25 / 0.25 / 0.38 / 0.38 / 0.38 / 0.38 / 1.1 / 1.5 / 1.9 / 2.0 / 2.0
Table 3: Internal Audit’s Performance Indictors for 2017/2018
Performance Indicator / Target
% completion of approved Audit Plan with agreed revisions (Key) / 100%
% of unproductive time (Key) / < 4%
% of Terms of Reference for planned audit reviews approved within 10 working days of issue (Key) / 100%
% of draft audit memos / reports finalised within 10 working days of closure meeting unless extension approved by the Audit and Assurance Manager (Key) / 100%
% of individual audit system reviews completed within target days or prior approved extension by the Audit and Assurance Manager (Key) / 100%
% of returned client satisfaction surveys with overall assessment of excellent (Key) / > 90%
% of audit time spent on providing additional value to the Council as per agreed methodology (Management Information) / 15 - 20%
No of working days lost per Internal Audit employee due to sickness / hospital appointments (Management Information) / < 1.5

QAIP

3.6 In accordance with PSIAS and CIPFA’s Local Government Application Note, a QAIP was developed for the Internal Audit Service and approved by this committee in September 2013. The purpose of the QAIP is to provide reasonable assurance to key stakeholders that the Internal Audit Service:

Ø  Performs its work in accordance with its Charter

Ø  Operates in an effective and efficient manner

Ø  Is perceived as adding value and improving the service that it provides

3.7 A summary of the outcomes from this programme against its key elements is enclosed at Table 4 with any improvements being identified and appropriate action taken to address them as they arise.

Table 4: Quality Assurance and Improvement Programme (QAIP) – Summary of Outcomes for 2016/2017

Key Element of QAIP / Outcome
Ongoing Reviews
Feedback from supervision of individual audit assignments / See Table 5
Quality reviews by the Audit and Assurance Manager of completed audit assignments / See Table 6
Feedback from client satisfaction questionnaires / See Table 7
Feedback from meetings with the Corporate Leadership Team (CLT) / Quarterly meetings being held evidenced by CLT briefings
Internal Audit performance indicator out turns / See Table 2
Compliance with the auditor rotation system / Fully compliant during 2016/2017
Periodic Reviews
Achievement of Internal Audit’s Service Plan / See Table 8
Annual assessment of Internal Audit’s conformance with its Charter, Public Sector Internal Auditing Standards and CIPFA’s Local Government Application Note / Full assessment carried out with no areas of non-conformance identified
Production of a risk assessed Audit Plan / Approved by the Audit Committee on 17 March 2017
Key Element of QAIP / Outcome
Benchmarking / Qualitative benchmarking carried out through the Nottinghamshire and Derbyshire Audit Group – Detailed cost comparisons were previously carried out as part of the Nottinghamshire Audit Consortium project
Reports to the Audit Committee on delivery of the Audit Plan / Quarterly progress reports have been presented to the Audit Committee during 2016/2017
Annual effectiveness review of the system of internal audit / See separate report on the Audit Committee’s agenda for 16 June 2017
Annual assessment of compliance with CIPFA’s Statement on the “Role of the Head of Internal Audit” / Results of the assessment are included within the effectiveness of internal audit report on the Audit Committee’s agenda for 16 June 2017

Table 5: Assignment Supervision Summary – 2016/2017